- The share of sell orders declined from 61 to 59%
- 60% of traders have a positive outlook towards the British Pound
- The nearest resistance is located around 1.4375
- Immediate support rests circa 1.4140
- 53% of traders reckon GBP/USD will be at 1.42 or lower in three months
- Upcoming events: US Jobless Claims, US Natural Gas Storage, US Federal Budget Balance
The UK Manufacturing and Industrial Production data had a mild effect on the British currency, with the Sterling crosses mostly inching a few pips higher. The Pound remained relatively unchanged against the US dollar, adding 0.01%, while a 0.10% gain was seen against the Euro and 0.18% versus the Swiss Franc. Exceptions were also seen, namely the GBP/JPY 0.65% rally, as demand for safe haven assets was weaker yesterday. Another substantial rally was recorded against the New Zealand Dollar, which suffered from the RBNZ's unexpected decision to cut interest rate further. At the same time, the BoC statement strengthened the Loonie, with GBP/CAD dropping 1.19% lower.
UK industrial production recovered in January after a sharp decline in December, led by a stronger than expected increase in manufacturing. Industrial output climbed 0.3% from December, when it dropped 1.1%, according to the Office for National Statistics. Economists, however, had expected a gain of 0.4%. Manufacturing increased 0.7%, while utilities increased production by 4.3%. The findings of the Confederation of British Industries survey showed the recent depreciation of the Pound helped some manufacturing firms to stabilize output and export orders. The CBI said that despite market volatility in emerging markets, China still represents a huge opportunity for the UK's industry. Industrial output remained 10.2% below its peak in early 2008 during three months to January 2016, while manufacturing production was 6.4% smaller.
The UK economy slowed in the second half of last year and economists predict that it could lose more momentum in early 2016. Analysts say that Britain's referendum on its European Union membership could also drag on growth. The EEF, an association of British manufacturing employers, revised its 2016 UK growth outlook down to 1.9%, from 2.1% and lowered its manufacturing growth forecast to 0.6% from 0.8%.
US Jobless Claims and Federal Budget Balance
There are no important economic data releases concerning the UK economy today, therefore, all attention will be paid to the US data to influence the Cable. First of all, the UK Jobless Claims, which are released by the US Department of Labor and are a measure of the number of people filing first-time claims for state unemployment insurance. In other words, it provides a measure of strength in the labor market. A larger than expected number indicates weakness in this market which influences the strength and direction of the US economy. However, the Jobless Claims tend to have a mild impact on the USD pairs. The second event to focus on is the The Monthly Budget Statement. It is released by the Financial Management Service and summarizes the financial activities of federal entities, disbursing officers, and Federal Reserve banks. A positive budget statement that receipts exceed budgetary outlays is seen as bullish for the USD.
GBP/USD keeps struggling to remain above 1.42
The British currency remained almost completely unchanged against the US Dollar on Wednesday in the wake of mixed fundamental data results. Although the Cable managed to stay above the 1.42 major level, technical studies suggest the pair could edge lower again today. The immediate support is represented by the 20-day SMA, the weekly and the monthly PPs, but the Sterling could still put the middle level of the cluster, namely the monthly PP at 1.4141, to the test. On the other hand, the psychological 1.42 mark might cause a rebound, as the GBP/USD was unable to close below that area since Monday.
Daily chart
The GBP/USD once again pierced the resistance line, thus, making it completely unviable. The 1.42 major level is still holding and keeping the Cable afloat, and with the breach of the down-trend, chances are the Sterling is to continue extending its bullish momentum.
Hourly chart
Three brokers - three sentiments
Today 60% of traders have a positive outlook towards the British Pound, compared to 56% on Wednesday. At the same time, the share of sell orders barely changed, as it declined from 61 to 59%.
The clients of the other two brokers seem to support our sentiment now. OANDA traders are bullish on the UK currency. Right now, 55% of them are long, compared to 56% on Wednesday. At the same time, among Saxo Bank traders short positions take up 51% of the market, while the remaining long ones – 49%.
Spreads (avg, pip) / Trading volume / Volatility
Majority sees GBP/USD below 1.42 in three months
The majority of traders (53%) believe the British currency is to cost 1.42 or less dollars after a three-month period. The most popular price interval was selected by 15% of the voters, namely the 1.48-1.50 one, while the second most popular choice implies that the Pound is to cost either between 1.34 and 1.36 dollars, or 1.40 and 1.42 dollars in three months, both chosen by 14% of the surveyed. At the same time, the mean forecast for June 10 is 1.4224.
During February 29 – March 4 time period the Dukascopy Community members assumed this currency pair is to increase further, since more than 64% of all votes are bullish. As predicted by traders, the GBP/USD may close around the 1.42 level this Friday.
Besim76, a trader with the positive outlook towards the Sterling, commented that the GBP/USD ended the week up 2.58% on weakness in the US dollar. "The Pound ended at 1.4228 level. The broader outlook for GBP/USD remains tilted to the downside as the BoE lags behind its US counterpart, and the pair may continue to carve a long-term series of lower highs & lows as the threat of an EU exit dampens the fundamental outlook for the UK", the trader added.
Meanwhile, Al-dcdemo expects the British currency to significantly weaken against the Greenback, as "the pullback may have ran its course". "I am expecting further downside on Brexit uncertainty and weaker economic data", he explained his outlook.